The Issue: Unemployment falls, but not because more people are working

Riddle me this: When is a drop in the U.S. unemployment rate not good news?

The Bureau of Labor Statistics last week reported the unemployment rate for March edged down to 7.6 percent, its lowest level since December 2008 -- good news, right?

Not so fast.

The size of the labor force is now pegged at 155 million, 496,000 fewer than in February, so the drop had more to do with people giving up on finding work than it did with companies hiring more employees.

In fact, a mere 88,000 new jobs were created, little more than a quarter of what economists say is necessary to bring down the unemployment rate to 6 percent, and though that brings us to 6.5 million in the last three years, the total pales against the number of unemployed Americans, 11.7 million with 4.6 million of them classified as long-term unemployed (more than 27 weeks) and 7.6 million underemployed. An additional 2.3 million people without jobs are not counted because they had not looked for work in the last four weeks.

University of Maryland economist Peter Morici said when discouraged workers are included in the statistics, the unemployment rate jumps to 13.8 percent.

And though the administration touted the BLS report as a sign of continuing progress, President Barack Obama acknowledged there's more work to do to get the economy rolling.

Obama's focus in his weekly radio address was on the fiscal 2014 budget he finally plans to deliver to Congress this week -- about two months late.

"To make America a magnet for good jobs, we'll invest in high-tech manufacturing and homegrown American energy, put people to work building new roads, bridges, and schools, and cut red tape to help businesses grow," he said, pounding the familiar themes about a balanced approach to deficit reduction (nobody talks about debt -- or even deficit -- elimination).

A better approach, Morici said, would be to create more and better jobs through "pro-growth trade, energy and regulatory policies, and more realistic expectations among parents, students and the high schools and universities that train workers."

Even as the administration was busy spinning the unemployment report as good news and evidence of continuing economic recovery, Alan Krueger, head of the President's Council of Economic Advisers, warned the full impact of the sequestration has yet to be felt.

"While the recovery was gaining traction before sequestration took effect, these arbitrary and unnecessary cuts to government services will be a headwind in the months to come, and will cut key investments in the nation's future competitiveness," Krueger said in a statement. "The Congressional Budget Office has estimated that the sequester will reduce employment by 750,000 full-time equivalent jobs by the end of the year."

White House spokesman Jay Carney noted the damage yet-to-come from the sequester still can be averted.

"I think that outside economists have predicted that the sequester, if it is not undone, will cost I think roughly a half a percentage point in economic growth, in GDP, and something like 750,000 jobs. That would be bad," Carney said. "That is unnecessary. That would be the result of an unnecessary choice made by Republicans in the House who thought that that was a better outcome -- or Republicans in both Houses -- that that was a better outcome for the American people -- reduced economic growth, reduced job creation -- than asking folks to give up special tax breaks -- corporate jet owners, wealthy individuals who get special deductions.

"These are proposals, again, that the speaker of the House said he supported in December, and now he claims are off the table in March and April."

A bright spot in the unemployment report was the increase in jobs in the professional and business services sectors, education and health services, construction, and leisure and hospitality. But the retail trade lost 24,100 jobs.

"March's discouraging job growth underscores the continuing volatility and fragility of the economy," Christine Owens, executive director of the National Employment Law Project, said in a statement. "We remain very far away from being able to address the deep and enduring crisis of long-term unemployment and underemployment that is holding millions of workers and our whole economy back.

"Our economy has been hollowed out and millions of people are unable to find the work they need to support their families. Long-term unemployed workers may be struggling in silence, but their place in this economy impacts everybody," Owens said. "The only way to achieve a sustainable recovery and rebuild a robust economy benefiting all is to address the ongoing crisis of long-term unemployment. To do that, our leaders need to invest in meaningful job creation programs instead of wasting time with partisan infighting or worse yet, doing damage with misguided austerity policies and huge budget cuts. Putting people back to work remains Americans' No. 1 priority. It should be our leaders' top priority too."

Morici notes college grads in technical fields have much brighter prospects than others.

"All this gives rise to widening income inequality between those who have specialized skills and those who don't, and it imposes particular burdens on the two bookends of the labor force -- recent grads and workers above 50," Morici said in a release.

"Recent liberal arts graduates face particular difficulty getting that first decent job -- such as in finance or the media -- where employer training and entry-level experience combine to impart job-specific skills that permit them to climb the ladder.

"Displaced older workers face much longer periods of unemployment, and many never secure positions that pay as well as the jobs lost. Many are digging into retirement savings well before they are 65, creating an army of near-indigent elderly a decade or two from now."

Morici notes getting parents to steer their children to more vocational tasks and to get college students to abandon the party school lifestyle for demanding technical fields will be a hard slog.

It also will require a turnaround in the way professors approach their fields.

"Universities are too much run by professors who prefer to contemplate the shortcomings of their civilization than train young people to build it," he said.

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